Bankruptcies down across mid-Hudson

POUGHKEEPSIE — Bankruptcy filings in the region have fallen dramatically from the darkest days of the recession, a trend attorneys tie to the decline in foreclosures.

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By Jessica DiNapoli

recordonline.com

By Jessica DiNapoli

Posted Feb. 19, 2013 at 2:00 AM

By Jessica DiNapoli

Posted Feb. 19, 2013 at 2:00 AM

» Social News

POUGHKEEPSIE — Bankruptcy filings in the region have fallen dramatically from the darkest days of the recession, a trend attorneys tie to the decline in foreclosures.

Total residential and commercial foreclosure filings in Orange, Sullivan and Ulster counties decreased more than 60 percent in 2011, but rebounded somewhat last year, according to data from the New York State Unified Court System. The decline has been so sharp that the three counties actually saw more foreclosure filings in 2010 than in 2011 and 2012 combined.

Bankruptcy filings in the Poughkeepsie office of U.S. Bankruptcy Court, which handles cases for much of the mid-Hudson, followed suit, plummeting and then picking up a bit from 2011 to last year.

The two legal proceedings often are tightly related. It's common practice for someone facing foreclosure to file for bankruptcy, which usually will delay a court-ordered sale of property.

Mortgage modifications may be skewing the relationship and could be the reason for the decline in bankruptcies and foreclosures since 2010. New Windsor attorney Warren Greher, who has seen his own bankruptcy caseload shrink in the past few years, said foreclosures were down because banks and the government were working on modifications, either changing the terms of a mortgage, tweaking the interest rate, reducing the principal, or some combination of the three.

A modification can stop a foreclosure altogether, if homeowners seek one as soon as they're under financial duress, said Faith Piatt, the executive director of the Orange County Rural Development Advisory Corp. If the lender already has filed foreclosure papers, a modification may prevent a bankruptcy filed on the eve of a foreclosure sale, she said.

In 2011, about 70 percent of all Greher's bankruptcy cases were filed on the eve of foreclosure. Now, it's down to about 50 percent, he said.

Laura Colavito-Agosta expects the mortgage modification for her Town of Newburgh home to be finalized in the next few weeks, after three years of fighting through red tape.

"It's a terrible process," she said.

Colavito-Agosta and her husband debated filing for bankruptcy, but opted against it because their mortgage and home equity line were their only financial problems.

Some people who are not paying their mortgages and are working on modifications are able to pay down their credit card debt, another financial burden that often sends people into bankruptcy, said Michael O'Leary, a Middletown attorney.

If the modification doesn't pan out, the homeowner has a lower credit card balance and is on slightly better financial footing than before, he said. If the modification works, "then they end up ahead of the game," he said.

Colavito-Agosta said she was able to pay down car loans and credit card balances during the modification process.

The profile of people now filing for bankruptcy has changed, O'Leary said.

"I think a lot of people filing now are the solidly middle-class folks," O'Leary said.

They're normally not great candidates for bankruptcy, because they have other assets, like cars with significant equity and bank accounts with high balances, he said.

A death in the family, job loss or unexpected expenses, such as medical care, may be sending some middle-class families that were able to stick out the worst of the economic downturn into bankruptcy, Piatt said.